Pavel Zavalny: turbulence in the global energy has changed for low prices reality

December 30, 2016/ 10:42

Moscow. In 2016 Russia beat its own records several times in terms of gas export, and in the end reached the amount of 170 billion cubic meters. Next year this figure may rise to 200 billion cubic meters. That was the forecast voiced by Pavel Zavalniy, Chairman of the State Duma’s Energy Committee, for the Oil and Gas Information Agency.

- Pavel Nikolaevich, which events in the oil and gas industry do you remember the best in 2016?

- This year a serious decision on the construction of North Stream2 pipeline was taken. A decision on the construction of Turkish Stream pipeline was taken as well. The intergovernmental agreement was signed, it has already been ratified by the Turkish party and is waiting ratification by the Russian State Duma. This year we supplied a record amount of export gas - about 170 billion cubic meters. If the trend continues, next year this figure may rise to 200 billion cubic meters. Besides, we are witnessing a positive dynamics in gas production in Russia for the last five years.
As for the oil industry, in 2016 a record amount of oil and gas condensate was produced – over 544 million tons. And with these indicators we faced the OPEC’s decision to cut oil production.

- What is your forecast for oil industry development in 2017?

- We should talk about trends here, and they don’t establish for a year, but for longer periods of time. First of all, this is very important, and all experts say so, the period of turbulence and uncertainty in the global energy is over. The place of hydrocarbons in the global energy balance is defined, including in the long-term perspective till 2040. The energy policy of developed countries will be to reduce their dependence on hydrocarbons and to increase their energy efficiency. It’s enough to say that next year at least 150 GW of electric power will be produced from renewable sources of energy. Meanwhile, all experts agree that the share of hydrocarbons in the global energy balance will remain at the present level until 2040. Today their share is 54% and is expected to decrease to 52%, while decreasing oil share and increasing gas share from 22% to 24%. With this the gas industry will enhance the scope of foreign trade from today’s 800 billion cubic meters a year to 1 trillion 200 billion. And if today LPG share is a little over 30%, by 2040 it will reach 50-60% of global gas trade.
As for the role of oil industry in Russian economy, which used to be called the engine of Russian Federation development, it is changing. Today FEC supports the economy’s development, providing energy source for its own purposes and 50% of currency earning. At the same time, the cash flow from FEC to the country’s budget, both Federal and regional is decreasing.

-What is your forecast as for the oil prices in 2017? How much may a barrel of oil cost?

-I estimate the possible price of oil for the nearest future at $55-60 for a barrel. Today the price is regulated not even by OPEC, but by the shale oil production volume. The USA is the biggest consumer of oil and condensate. It’s enough to say that the USA consumes around 20% of all globally produced oil. $55-60 for a barrel is the break-even point for oil in the USA. It’s clear that the technology will continue to develop, so the oil production cost will decrease. But the cream from the shale oil has already been skimmed.
As far as conventional oil is concerned, its supply will decrease in the future. Due to the crisis, investment into exploration and field development decreased. The global reserves in general are declining. There are no big oilfields. New reserves are small and are located in inaccessible places. There is no light oil left, apart from the Middle East. In the future there is a trend for oil price increase.